Securities Industry Commentator by Bill Singer Esq

June 10, 2020

United States of America, Plaintiff/Appellee, v. Priscilla Ann Ellis and Perry Cortese, Defendants/Appellants (Opinion, United States Court of Appeals for the Eleventh Circuit . No. 17-14716)
On appeal from the United States District Court for the Middle District of Florida, Defendants Ellis and Cortese were convicted by a jury of conspiracy to commit mail and wire fraud, and conspiracy to launder money. MDFL sentenced Ellis to 240 months on each count to be served consecutively for a total sentence of 480 months in prison; and Cortese was sentenced to 240 months for the fraud conspiracy plus a conseuctive 60 months for the money-laundering conspiracy for a total sentence of 300 months. The 11Cir found that the challenged MDFL venue was proper and that the District Court's calculation of the "intended" losses was not in error, and that the sentences were not substantively unreasonable. Accordingly, 11Cir affirmed MDFL. 

Normally, I would spend far more time on the issues on appeal and the courts' rationales. Not with this case. Given the nature of the underlying crimes, I'm not going to waste my time on the jurisprudence. As such, sit back and consider the nature of the crimes, which I offer to you unedited from the 11Cir Opinion's "Background":

Ellis is an Army veteran who lived in Harker Heights, Texas, during the relevant time period. Cortese is an attorney who lived in Little River, Texas. According to the evidence presented at trial, Ellis and Cortese were part of an international fraudulent scheme that began in 2012 and continued into 2015. The government's evidence, which included testimony from cooperating members of the conspiracy and from numerous victims, showed that the conspiracy had fraudulently obtained millions of dollars from scores of victims. 

The conspiracy used different scams, but the heart of the operation involved duping victims into depositing counterfeit cashier's checks in their own bank accounts and then wiring the proceeds to shell companies and overseas bank accounts controlled by the conspirators before the counterfeiting was discovered. The conspirators used various methods to find their victims, such as emailing law firms or title companies to seek assistance in closing a real estate transaction or resolving a business dispute, sending out emails offering opportunities to work from home, and using online dating services to trick women into perceived relationships and gain access to their bank accounts. Sometimes the conspirators simply hacked a victim's email account and used the victim's personal information to conduct wire transfers. 

The operation was directed by Ikechukwu Amadi, a Canadian citizen and Nigerian national who used numerous aliases during the course of the conspiracy. Other members of the conspiracy included Akohomen Ighedoise, a Canadian citizen and Nigerian national; Muhammad Naji, a Jordanian national who lived in Tampa, Florida; Stacey Merritt, an Alaska resident; and Kenietta Johnson, who is Ellis's daughter and worked at a bank in Alexandria, Virginia. 

Viewed in the light most favorable to the government, the evidence presented at trial showed that Ellis was deeply involved in the operation of the scheme. Amadi sent her information about counterfeit checks to be created, and Ellis worked with another co-conspirator (believed to be in South Africa) and Johnson to create and print the counterfeit checks used by the conspiracy. She brought her sister and her daughter into the scheme, recruited others to open bank accounts to be used by the conspirators, and gave instructions to other co-conspirators about where funds should be directed. Millions of dollars of fraudulent proceeds were routed through the bank account of a corporation she controlled.

Cortese's role in the conspiracies was somewhat more limited. One of his important functions was to intervene when necessary to "unfreeze" accounts that had been locked by banks because of suspicious transactions. Cortese worked closely with Ellis, and funds from many of the scams Ellis was involved in flowed through his law firm trust account. On one occasion, Ellis arranged for Cortese to fly to Utah to pick up cash from a woman who had been ensnared through one of the online-romance scams. Along with Ellis, Cortese recruited his paralegal to open bank accounts to be used by the conspiracy, and fraudulent proceeds were wired from those accounts into Cortese's law firm trust account and given to him in cash.

The operative indictment named Amadi, Ighedoise, Ellis, Cortese, Merritt, and Johnson as defendants, but the trial proceeded against only Ellis, Cortese, and Johnson.1 Ellis represented herself at trial. Trial witnesses included Naji and Zoni Mullins, who was Cortese's paralegal, as well as numerous victims of the scams. On October 21, 2016, the jury convicted Ellis, Cortese, and Johnson of conspiracy to commit mail and wire fraud and conspiracy to launder money. (Johnson has not appealed her convictions.) 

In January 2017, Ellis -- while incarcerated on the charges in this case -- conspired with others to create and pass more counterfeit checks. She needed cash so she could hire a hitman to kill Naji's mother, Mullins, and Mullins's nine-yearold daughter in retaliation for their trial testimony. Based on that incident, Ellis was indicted on additional federal charges of using interstate commerce facilities in the commission of murder for hire and retaliating against a witness. Ellis was convicted of all charges arising from the murder-for-hire scheme several months before being sentenced in this case.2

Prior to the sentencing hearing in this case, the district court held an evidentiary hearing to determine the loss amount that would be attributed to the defendants. The court determined that Ellis and Cortese could reasonably have foreseen a total intended loss of $15,147,908.16 during the period they were involved with the conspiracy. After application of the loss-amount and other offense-level enhancements, Ellis's advisory sentencing range was 360-480 months. The district court found Ellis's conduct "incomprehensible," describing it as "evil and wicked, predatory." . . .


Footnote 1: Merritt pleaded guilty shortly before trial and testified for the government. At the time of the trial, the government was in the process of seeking extradition of Amadi and Ighedoise from Canada.

Footnote 2: After the sentencing in this case, the district court in the murder-for-hire case sentenced Ellis to 65 years' imprisonment, with the sentence to run consecutive to the sentences in this case.
Yeah, right. And the #1 trade for these Robinhood investors was GNUS, which was up to $7.93 on June 3, 2020. Wonder how that great trade is panning out today. Trading is NOT investing. Nothing wrong with trading. It's just not a game and too many small traders lose their "play" money. As CNBC's Fitzgerald reports in part:

Robinhood -- which serves more than 10 million customers with an average client age of 31 -- saw new investors piling into stay-at-home stocks and those most beaten down by the economic shutdown, like airlines, casinos and hotels. Traders also bought into speculative names like Hertz and Nikola.
Where there's smoke, there's fire. Unless there isn't any fire but only smoke. And thus we have the conundrum of today's featured FINRA Arbitration Decision. Did a rep double-bill his clients for asset management fees? Maybe. Maybe not. One thing that's for sure, no such proof was presented at the hearing. Should the unanswered questions prompt FINRA the regulator to intrude into FINRA the arbitration forum? Would your answer change if you knew that the rep won a dismissal of the claims? Our publisher Bill Singer, Esq. doesn't have an answer. See what you think.
The CFTC issued an Order Determining Whistleblower Award Claims (CFTC Whistleblower Award Determination No. 20-WB-05) whereby a whistleblower was awarded $6 million. The Order notes that CFTC's Claims Review Staff ("CRS") recommended an Award to Claimant #1 but denied any award to Claimant #2 - #5 (the denied Claimants did not exhaust their administrative remedies via response to the Preliminary Determination of denial).
In a Complaint filed in the United States District Court for the Northern District of California, the SEC charged pennystock trader Jason C. Nielsen with violating the antifraud provisions of the federal securities laws by allegedly engaging in a pump-and-dump scheme involving a biotech stock. As alleged in part in the DOJ Release:

[B]eginning around March 2, 2020, Jason C. Nielsen attempted to drive the stock price of Arrayit Corporation securities higher using online posts encouraging investors to purchase shares, including numerous messages repeating the false assertion regarding an approved COVID-19 test, without telling them about his large position in Arrayit stock or his plans to sell the shares while others were buying. Nielsen also allegedly created the false impression of high demand for Arrayit stock by placing and subsequently canceling several large orders to purchase shares in a tactic known as "spoofing." According to the SEC's complaint, Nielsen made approximately $137,000 in six weeks, but based on questions regarding the accuracy and adequacy of publicly available information concerning Arrayit, the SEC temporarily suspended trading in Arrayit securities on April 13, 2020, before Nielsen was able to profit further from the scheme.
You may not know this but sea cucumbers (Isostichopus fuscus) are listed on Appendix III of the Convention on International Trade in Endangered Species ("CITES"), and an importer must be able to produce a CITES certificate of origin and export permit fro the originating country in order to legally import such endangered species into the United States. Just in case you were wondering, that's set out in Section 1538(c)(1) of Title 16 of the United States Code.  Sections 23.13 and 23.27 of Title 50 of the Code of Federal Regulations. 

All of which leads us to the criminal case of Claudia Castillo of Tijuana, Mexico, who pled guilty in the United States District Court for the Southern District of California to Conspiring to Import Merchandise Contrary to Law, in violation of Title 18, United States Code, Section 371 and 545; and she was sentenced to eight months in custody and ordered to pay $12,000 restitution to the government of Mexico. As alleged in part in the DOJ Release:

[C]astillo admitted that between January 19, 2018 and September 4, 2019, she conspired with others to smuggle and illegally import sea cucumbers of the species Isostichopus fuscus into the United States from Mexico. Castillo obtained bags containing approximately 2 kg of the sea cucumbers from others in Mexico and would either smuggle the packages into the United States herself, or deliver the packages to others she recruited in order to be smuggled into the United States. Castillo directed the individuals she recruited to deliver the sea cucumbers to a self-storage unit near the border in San Ysidro, California, where the sea cucumber could be accessed by others for further transportation and sale

Castillo had the individuals she recruited provide her with photographs of the sea cucumbers within the self-storage unit as proof of delivery, and when delivery was confirmed, she would pay them $7 for each bag that was delivered. Castillo herself was stopped at the border with six bags of undeclared sea cucumbers hidden in her vehicle in May of 2018.

. . .

Castillo knew that neither she nor her assistants possessed the necessary CITES documents for the sea cucumber. In order to import a commercial quantity of sea cucumber into the United States, a license from the U.S. Fish and Wildlife Service (FWS) is required, pursuant to Section 1538(d)(1) of Title 16 of the United States Code.   Neither Castillo nor her associates possessed such a license.  The fair market value of the sea cucumbers illegally imported as a part of this conspiracy was between $40,000 and $95,000.

Bill Singer's Comment: What do I know? I thought a sea cucumber was a vegetable like seaweed. Be that as it may, I don't know about you but as for me, I'm sure as hell going to sleep a lot better tonight knowing that our federal government is on top of this sea cucumber piracy. In a time of COVID plague; and demonstrations by armed citizens protesting social distancing; and citizens driving cars into peaceful protesters; and demonstrations by citizens protesting racism; and looting by citizens angry about some things but also looking for an opportunity to steal; and the President calling in the Army so that he can displace peaceful protesters in order to hold up a Bible; and the economy struggling in Recession; and millions of unemployed not sure when they're getting back to work (if ever), how nice, how wonderful it is to know that FWS employees, and DOJ lawyers, and the federal courts have the time and resources to extract guilty pleas involving sea cucumber piracy. All of which makes you wonder who sets the agenda for what we investigate and what we prosecute. Sea cucumbers? Okay, sure, but it's an odd set of priorities in these times. 
Also read: El Paso Man Pleads Guilty to Role in Scheme to Sell Protected Cacti (DOJ Release), in which we come across yet another CITES prosecution in which Defendant Bock pled guilty to one count of mislabeled exports based upon his role in a conspiracy that submitted false identification of actual living rock cacti (Ariocarpus fissuratus), a protected species, with the intent to export and sell the plants for financial gain. In yet another example of federal law enforcement priorities, we are offered this quote:

"When you mess with protected Texas cacti, you're messing with Texas. My office will continue to work with our law-enforcement partners to protect our State's natural heritage," stated U.S. Attorney Bash.